Global equity markets are waking up to a new $558 billion magnet pulling cash out of developing nations from Russia to Malaysia.

As Saudi Arabia lifts a ban on direct investments by foreigners, fund allocators are preparing to shift money out of other countries and put it to work in the Arab world’s largest stock market. While there’s little consensus on which country will be the biggest loser, money managers mostly agree that energy producers will feel the heaviest effects.

Below are the views of seven emerging-markets investors and strategists on what to expect:

Martial Godet, head of emerging-market equities and derivatives strategy at BNP Paribas SA in Paris:

Saudi Arabia “will not be a bargain, but it can be a nice diversification from emerging Asia that has become increasingly large within emerging markets. The biggest losers will be markets associated with oil and energy: Brazil, Mexico, Russia, Indonesia, Malaysia.”

Maarten-Jan Bakkum, senior emerging-markets strategist at NN Investment Partners in The Hague:

“Investors will eventually sell a bit across the board to get to a decent weight in Saudi Arabia. There might be a bit more selling in other oil countries, but then we should ask ourselves what are the pure oil plays in emerging-markets, comparable to Saudi Arabia? Only Russia comes close.”

Charles Robertson, global chief economist at Renaissance Capital Ltd. in London:

“The United Arab Emirates and Qatar may suffer. After Saudi Arabia’s inclusion in MSCI EM, investors might think: why bother looking at small Qatar when you can choose Saudi to be your Gulf proxy?”

James Bannan, who oversees the $150 million Frontier Markets Fund at Coeli Asset Management in Malmo, Sweden:

“Most of the large frontier-market funds already have decent exposure to Saudi Arabia. If they were to increase their exposure, it would come from allocations in the region, namely Kuwait, the U.A.E., Qatar and Oman.”

Rami Sidani, the head of frontier markets at Schroder Investment Management Ltd. in Dubai:

“The event of Saudi Arabia opening up is a very positive development for the entire Gulf region, as it graduates to becoming an investment destination for emerging-market funds. The Gulf market won’t be able to be disregarded by international investors as an asset class.”

Julian Mayo, who helps manage $2.3 billion in developing-market assets as co-chief investment officer at Charlemagne Capital in London:

“This move will gradually benefit Saudi in the next two years, as Saudi becomes investible to a wider range of investors, but we don’t expect any specific market to suffer as a result of this move. Ultimately, stock performance depends on fundamentals of earnings and valuations.”

Ghadir Abu Leil-Cooper, the head of the Europe, Middle East, Africa and global frontier markets equity team at Baring Investment Services Ltd. in London:

“I don’t think there is going to be a massive knock-on effect to start with from the day of the opening, as the market is being opened in a very limited way with a lot of requirements for anyone wanting to go into the market directly. We are already in Saudi Arabia. It’s an out-of-index position in my fund, which is around 20%.”

Source: Bloomberg